1.1 This is the eleventh report by the Low Pay Commission since the introduction of the National Minimum Wage in 1999. The Commission’s last report was published in May 2009, at which time the National Minimum Wage was facing up to its first recession. The recession has been the longest and deepest since World War II, with a steep decline in gross domestic product growth. Employment, although adversely affected, has held up better than expected, particularly in the low-paying sectors and for the lowest paid. As we look ahead, it seems the UK economy is now on track for recovery and it is in this light that the Commission presents its report this year.
1.2 In this chapter, we specify the remit given to us by the Government for this year, and give an overview of the work we have undertaken to meet it.
Terms of Reference 2010
1.3 Our terms of reference for the 2010 Report asked that we carry out the following work and report to the Prime Minister and the Secretary of State for Business, Innovation and Skills by the end of February 2010.
- Monitor, evaluate and review the National Minimum Wage and its impact, with particular reference to the effect on pay, employment and competitiveness in the low-paying sectors and small firms; the effect on different groups of workers, including different age groups, ethnic minorities, women and people with disabilities and migrant workers and the effect on pay structures.
- Review the levels of each of the different minimum wage rates and make recommendations for October 2010. The Commission is also asked to make provisional rate recommendations as appropriate for October 2011.
- Consider the detailed arrangements for an apprentice minimum wage under the National Minimum Wage framework (as set out in the National Minimum Wage Act 1998), and to recommend the rate and arrangements that should replace the existing exemptions, together with the timing for its introduction. The Commission is asked to do this with reference to:
- the issues and groups to which it has particular regard when reviewing the established rates, as laid out above;
- the need to ensure that sufficient volume, quality and sectoral variety of apprentice places are available to meet government targets, in particular when the education participation age is raised in England in 2013 and 2015; and
- the effective functioning of the education market and young people’s choices with reference to the level of financial payment available on other education and training routes.
1.4 On receipt of its remit, the Commission began gathering and analysing data to inform its recommendations. The remainder of the chapter provides a short review of the programme of work we undertook to fulfil the remit.
Consultation
1.5 We have again consulted widely in preparing this report. The consultation involved individuals, trade unions, businesses and groups representing each of the low-paying sectors. As always, the process provided useful information, which enhanced our understanding and consideration of the issues involved.
1.6 Between June and September, we undertook a two-part formal written consultation, consisting of a general consultation and an apprentice consultation. The general consultation sought views on the impact of the minimum wage and related issues, to which we received 59 responses. The apprentice consultation asked for views on the rate of an apprentice minimum wage and related issues, to which we received 52 responses. Responses were received from trade unions, employer organisations, trade associations, individuals, voluntary organisations and the Government. The written information was considered alongside the other evidence we gathered during the year. Our Secretariat also met over 50 individuals and organisations during the summer and autumn to discuss their views and concerns on the minimum wage in more detail.
1.7 We held oral evidence sessions over two days in late October and heard from a number of organisations, including the Trades Union Congress, CBI and groups representing the care, hairdressing, hospitality, and retail sectors, as well as those working with young people. The oral evidence sessions gave the organisations the opportunity to update and further their arguments made in response to the written consultation and gave Commissioners the opportunity to explore the options on rates and related issues.
1.8 We would like to record our thanks to all those individuals and organisations who took the time to respond to our consultation and to those who gave oral evidence. A list of those who did so can be found in Appendix 1.
Research
1.9 For the 2010 Report, we commissioned through an open tender process 9 new research projects covering various aspects of our remit. The research programme focused on young people by looking at apprenticeships, the impact of the introduction of the 16–17 Year Old Rate and the age-related aspects of the minimum wage. The programme also looked at the impact of the latest increases in the minimum wage; the interaction of the minimum wage with the tax and benefit system; the impact of the minimum wage on wage growth, relativities and differentials; and the potential use of alternative modelling strategies to identify the impact of the minimum wage.
1.10 As ever, our research programme provided invaluable evidence underpinning our recommendations. Details of the research projects and a summary of the findings are set out in Appendix 2.
Statistics
1.11 Our recommendations are strongly rooted in economic evidence. To this end, we have worked closely with the Office for National Statistics (ONS) to obtain a comprehensive and consistent database on earnings and employment. We welcome the restoration of the full 1 per cent sample of the Annual Survey of Hours and Earnings, the ONS annual earnings survey, and we note that it continues to provide a reliable and crucial source of information. We have also worked closely with ONS to enable us to take account of the introduction of a new standard industrial classification system, SIC 2007, to mitigate any detrimental impact on our analyses of the low-paying sectors.
Visits
1.12 As in previous years, we undertook a programme of visits around the country, which gave Commissioners the opportunity to talk directly to those affected by the minimum wage. We once again focused on groups in the low-paying sectors as well as, this year, on those with an interest in an apprentice minimum wage, and on groups of young people. We held meetings with apprentices and their employers, training providers, business managers and workers, and organisations representing the low-paying sectors or groups of workers. For instance, we met with participants on Prince’s Trust programmes, representatives from London Citizens, and groups of workers in the care and retail sectors. During these visits we also met directly with some of HM Revenue & Customs’ Compliance Officers to discuss issues around the current enforcement regime. Visits took place in Belfast, Bristol, Cambridge, Inverness, Leicester, Liverpool, Llandudno, and London.
Timing
1.13 As well as meetings with stakeholders, oral evidence sessions, research workshops and visits, the Commission met eight times during the year. These culminated in a meeting that took place over two days in late January 2010 to review and assess the stakeholder evidence, research outcomes and economic data, and to agree the recommendations contained in this report.
Conclusion
1.14 In fulfilling its remit from Government, the Commission once again undertook a full programme of work. We were asked to monitor and evaluate the impact of the minimum wage, make recommendations on the minimum wage rates for October 2010 and, as appropriate 2011, and to make a recommendation on the apprentice minimum wage rate. We have commissioned research, analysed data, consulted widely and travelled across the UK to build an evidence base to inform our recommendations. We are grateful to, and would like to thank, the many organisations and individuals who shared their views with the Commission. Their input has been invaluable in helping to inform the content and recommendations of this report. The chapters that follow give a thorough breakdown of our findings and the recommendations that flow from them.
